Calculating profit margins is essential for understanding your business's profitability. By determining the profit margin, you can make informed decisions about pricing, cost control, and overall financial strategy.
Introduction
Profit margin is a financial metric that shows the percentage of profit earned on each dollar of sales. It is calculated by dividing the net profit by the revenue and multiplying by 100. This simple formula helps businesses understand how much profit they are making relative to their sales.
Profit Margin Calculator in Excel
Below is a table representing how the Excel sheet should be structured using more general products. You can use this template to create an embedded Excel sheet that calculates the profit margins for your products.
Exercise
- Calculate the profit
- Calculate the profit margin (%)
Solution
- =C2-B2
- =(D2/C2) * 100